Wednesday 5 September 2012 16.00 EDT
First published on Wednesday 5 September 2012 16.00 EDT

Now that David Cameron's first reshuffle has taken the coalition to the right, how should Ed Miliband respond? The Blairites will argue that Cameron has all but abandoned his project to make the Conservatives a kinder, gentler, greener party, while the Liberal Democrats have allowed themselves to be dragged rightwards behind him.

British elections are won by parties that occupy the centre ground, Blairites will say. Miliband should seize it. George Osborne's public spending cuts – the effects of which have hardly been felt so far – will do the rest. The only danger to Labour is that the Lib Dems dump Nick Clegg and, by 2015, detach themselves from their coalition partners sufficiently to re-establish their centrist credentials.

But Miliband should question this analysis and look around him. France has elected a president who promised a 75% tax rate on the wealthy, a retirement age of 60 (down from 62), a "Tobin tax" on financial transactions, more social homes, 60,000 more teachers, a public investment bank, and subsidised jobs for the young. In Greece, the leftwing Syriza party increased its vote by 12% in May and another 10% in June. Now, a general election campaign in the Netherlands (voting takes place next week) has seen a surge in support for the Socialist party, which wants to raise income tax to 65% on top earners. Meanwhile, the centre-right Christian Democrats, once the natural governing party, could be down to just 12 seats.

These political movements aren't easy to interpret. The Netherlands is seeing a late recovery from the more centrist Labour party while, in France, critics accuse François Hollande of rowing back on his programme. Most European mainland countries were never as wedded to neoliberalism as the British and Americans, and particularly not to giving the financial services industry such a dominant role in their economies. They may therefore be less easily frightened by the prospect of hedge fund managers moving to Zurich.

Besides, all election results since 2008 have punished incumbent parties. Left-wing parties in Spain, Italy, Portugal and the UK were holding office as the economic outlook worsened and, for a time, it seemed that despite capitalism's biggest crisis in nearly 80 years, the right would benefit. Now, as centre right governments come up for re-election, they too face the voters' anger as economic prospects fail to improve. Having already punished the centre left, or seeing it with no clear alternatives, voters look beyond the centre ground, sometimes to the right, sometimes to the left. In Britain, Ukip flourishes and so, spasmodically, does the Respect party.

It would be a mistake, therefore, to see recent election results and opinion polls as evidence of mass support for full-blooded socialism. But in important respects, the neoliberal political project is unravelling, and if the left can set out an alternative rather than wait for votes to drop into its lap, its opportunities are greater than at any time in the past 50 years.

The big idea of the post-1970s right in Britain and the US was that everyone would acquire a stake in capitalism, through home ownership (and treatment of houses as speculative investments); money-purchase pensions, where what you got depended on the stock market; modest ownership of shares or bank "products" linked to share indices; and opportunities, created by deregulation, to shop around for "deals" on services such as power supply, phones, savings rates and insurance. We would all, at least in our private lives, become members of the bourgeoisie, naturally sympathetic to "wealth creators" and their political allies. It may be true that only 1% are truly rich, but most of the 99% owe what wealth they have to houses and other tradeable investments, even if they are not always aware of it.

For a time the strategy worked. Voters hesitated to support any party which threatened economic change that might cause house prices or shares to fall. New Labour was created to allay such fears. Now the neoliberal revolution has gone into reverse. In England, the proportion of households living in their own homes, which was 55% at the beginning of the 1980s, peaked at 71% in 2003, thanks to greater mortgage availability and Thatcher's "right to buy" policy for council homes. It fell to 66% in 2010/11. Private renting accounted for 10% of households in 2001, now it is 16.5%. A report last year from the Smith Institute suggested owner occupation could be lower than 60% by 2025, and private renting well over 20%. If so, nearly two million fewer people will be living in their own homes. In the US, home ownership and the predictions for its future follow a similar curve.

As for money-purchase pensions, stock market stagnation since the beginning of the century and steep falls in annuity rates leave many of the newly retired with nothing like the retirement incomes they expected. This is hardly likely to encourage those still at work to join pension schemes, as the government wishes.

Neoliberalism, then, has failed to deliver on its promises. Houses have provided stores of wealth for the majority of Britons born before 1970. Equally, pension funds that carry defined benefits (almost wholly closed to newly recruited private sector workers) provide a steady income or, for those in their 50s and early 60s, the prospect of it. But younger generations struggle to access both pension schemes and houses. Home ownership rates among the under-45s are lower than they were in 1960. The steepest decline is among those aged 18 to 30. In 1997, nearly 35% owned their own homes. Now it's fewer than 20%, a proportion that is projected to fall to barely 10% by 2020. At least half the UK's private sector workforce has no pension of any sort, beyond what the state provides.

More and more voters, therefore, will be worrying about jobs, benefits, rents, and debt interest rates, not about the value of houses, pensions or shares. The neoliberal attempt to create mass capitalism has hit the buffers. Political parties that stand on what has been called "the centre ground" for the past three decades can afford to abandon it. If the left parties can develop a coherent economic alternative, they will find an increasingly receptive audience who, in the words of Franklin Roosevelt, have nothing to fear but fear itself.